I ran across an interesting article today by Eric Lundquist of eWeek. In this article, titled "SAAS Route Could be Bumpy", Lundquist points out what should be (but apparently is not) obvious: that the SaaS model requires a lot of investment dollars just to keep the lights on, much less provide innovative new functionality to customers. Capital spending on data centers and other infrastructure puts a major damper on the recurring revenue model of SaaS providers. The logical implications of this fact are even more depressing. If the SaaS provider has to pay more, then its customers will have to pay more – simple as that. It is extremely hard to cheat math.
Companies have been switching to SaaS ostensibly to save money over server software. Server software was becoming far too complex and required too much maintenance, and this complexity was costing companies millions. SaaS moved the complexity to the vendor, but, as evidenced by massive capital spending, did nothing to reduce it. The cost of complexity just gets passed on to the customer. This means that when the wheel comes full circle, the customer may have gotten out of dealing with the problem, but he still has to pay for it in the end.
